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The marginal utilities of hamburgers and Cokes for a certain consumer are given as follows: MU H = C/H and MU C = H/C Show

The marginal utilities of hamburgers and Cokes for a certain consumer are given as follows:

MUH = C/H and MUC = H/C

  1. Show that the law of diminishing marginal utility applies to both goods.
  2. If PH = $4, PC =$1, and consumer income is $18, determine the optimal levels of hamburgers and Cokes consumed.
  3. If prices stay the same but income rises to $24, how is your answer to section b affected?Are hamburgers and Cokes normal or inferior goods? Explain.
  4. If only the price of hamburger is lowered to $1, how is your answer to section b affected? Are hamburgers and Cokes complements or substitutes? Why?

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